Amid the toughest investment market in the nation’s history, county officials are sending mixed signals regarding the stability of the county’s $8 billion retirement system that administers pensions for nearly 20,000 public workers.

There are investment losses, swirling lawsuits, ballot measures, bids to abandon the local system and even calls for armed deputies at retirement board meetings.

Orange County’s retirement system keeps generating headlines because of a combination of investment losses and generous benefit increases given out by county supervisors to public safety workers in 2001 and general workers in 2004. The key for taxpayers is that as the systems’ liabilities expand, so do annual payments. And that creates pressure on the county’s general fund because there’s ultimately less money for key public services.

As budgets and options tighten, tempers flare.

On Tuesday, a day after the district attorney announced a review of a controversial proposed board appointment to oversee the Orange County Employees Retirement System (OCERS), and despite intense opposition from labor groups, supervisors moved to appoint Thomas Flanigan on a 3-2 vote. Supervisors Pat Bates and Janet Nguyen opposed the board majority.

Flanigan’s appointment was opposed by labor groups because of his ties to an investment firm called Ryan Labs. State law prohibits pension board members from working with firms that sell pension products. Flanigan said he doesn’t work there but statements by company officials left doubt about whether he was connected to the firm. After a long debate, supervisors approved the appointment on a tight vote.

The tenuous nature of the vote was evidenced when Supervisor Chris Norby, a key swing vote, told his colleagues to get Flanigan off the dais because he was tired of hearing him speak about his financial theories.

Supervisors then approved hiring a Sheriff’s deputy to patrol OCERS board meetings because board members are worried about violence during disability hearings. That was followed by a union request calling on the county to consider abandoning OCERS and joining the state’s retirement system, CALPERS.

“It’s just attack, attack, attack,” said Nick Berardino, general manager of the county’s largest union – the Orange County Employees Association. Berardino told supervisors they have vilified the pension system in virtually all of their re-election bids since the recent pension increases. Labor groups, and employees, are increasingly unnerved by having their retirement benefits used as a political football, he said.

“We’d like to get it out of the political arena here,” Berardino said.

County supervisors disagreed. The county’s pension system stays put here in Orange County.

That battle was followed by a financial update advising supervisors that the local retirement system has lost nearly 12 percent of its value, which is actually not bad compared to the losses (25 percent at CALPERS) at other retirement systems, officials said.

Next month, OCERS releases the annual rates it sets for contributions from employers such as the county. Earlier this year, county officials were incensed when they saw initial estimates on the hike in required contributions. Estimates for the November increases run in the area of $8 million to $12 million, according to OCERS CEO Steve Delaney.

Despite the mounting friction between the county, OCERs and organized labor, OCERS board chairman, Reed Royalty said people “should be very confident about how the pension system is administered.”

Yet Royalty sounds a different note when he wears his other hat – as chairman of the OC Taxpayers Association and key sponsor of the Measure J ballot initiative seeking to have voters, not supervisors approve pension enhancements.

“Taxpayers are concerned that past boards (of supervisors) have been unable to turn down anything the unions want,” he said.

An additional twist for Royalty as OCERS chairman has been to advocate for the retirement system in the current lawsuit brought by the county that seeks to reverse portions of the pension benefit granted to deputy sheriffs in 2001.

That lawsuit is in addition to the suit brought by retirees against the county for trimming their retirement benefits. Earlier this month, county officials almost sued the retirement system again after finding out they were deducting fees for the retirees to pay for the lawsuit against the county.

Amid all the swirling activity, Royalty smiles noting the ironies but says a certain level of tension is appropriate and manageable.